ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 4646/12(Welland)
DATE: 2014-08-12
B E T W E E N:
2143569 Ontario Inc.
Brent K. Harasym, counsel for the Applicant
Applicant
- and -
The Minister of Revenue
Jessica Fiore, counsel for the Respondent
Respondent
HEARD: in Welland on July 15, 2014
REASONS FOR JUDGMENT
LOFCHIK, J.
[1] This is an application by way of appeal from the Ministry of Revenue’s decision to refuse to refund deferred land transfer tax.
[2] The appellant and Your Host Motor Inn (“Your Host”) are corporations controlled by Nancy McIntosh Holdings Corporation (“McIntosh Holdings”). Therefore the appellant and Your Host and McIntosh Holdings are affiliated corporations.
[3] Prior to September 4, 2007, Your Host held both the legal and beneficial ownership to the land known municipally as 5551 Murray Street, Niagara Falls, Ontario (the “property”). On September 4th, 2007, Your Host entered into a trust agreement (the “agreement”), with McIntosh Holdings wherein McIntosh Holdings would hold title to the property in trust for Your Host.
[4] On September 5, 2007, legal title to the property was transferred from Your Host to McIntosh Holdings in accordance with the trust agreement.
[5] After this transfer, McIntosh Holdings was the registered owner of the property and their trustee. Your Host was the beneficial owner.
[6] On September 12, 2007, Your Host transferred its beneficial interest in the property to the appellant. Your Host and the appellant are affiliated corporations. This transfer was conveyed by an unregistered disposition. The appellant and Your Host are both subsidiaries of McIntosh Holdings.
[7] On September 14, 2007 the appellant submitted an Application and Undertaking for the Deferral of Land Transfer Tax pursuant to subsection 3 (9) of the Land Transfer Tax Act.
[8] The provisions of S. 3(9) and 3(11) of the Land Transfer Tax Act read as follows:
Deferred payment
3(9) If the disposition of a beneficial interest in land is from one corporation to another corporation, each of which is an affiliate of the other immediately before and at the time of the disposition, the Minister may defer the payment of the tax payable by virtue of this section by the corporation acquiring the beneficial interest if,
(a) before the thirtieth day after the date of disposition of the beneficial interest in the land, the corporation applies to the Minister for the deferral and submits a written undertaking satisfactory to the Minister, undertaking that for a period of at least thirty-six consecutive months immediately following the date of the disposition,
(i) the corporation making the disposition and the corporation acquiring the beneficial interest on the disposition will continue to be affiliates of each other, and
(ii) the beneficial interest in the land will continue to be owned by the corporation acquiring the beneficial interest on the disposition or by a corporation that is an affiliate of that corporation and with the corporation which made the disposition of the beneficial interest in the land;
(b) security for the tax in a form and a kind of acceptable to the Minister is furnished to the Minister; and
(c) no conveyance or instrument or electronic document evidencing the disposition has been registered.
Cancellation of tax
3(11) The Minister shall return the security furnished in respect of the deferral granted under subsection (9) and the amount of tax deferred is no longer owing by reason of this section if,
(a) the Minister is of the opinion that the undertaking given under subsection (9) has been satisfied and no conveyance or instrument evidencing the disposition of the beneficial interest in land has been registered;
(b) a conveyance or instrument or electronic document evidencing the disposition of the beneficial interest in land to the corporation has been registered and the tax payable under subsection 2 (1) has been paid; or
(c) there has been a disposition of the beneficial interest in the land, or a conveyance of the land, by the corporation, or by an affiliate of the corporation, to a person who is not affiliate of the corporation and tax has been paid under this Act in respect of that disposition or on registration of the conveyance, as applicable.
[9] On August 20th, 2008, a development agreement (the “agreement”) was registered on title to the property by the city of Niagara Falls in accordance with S.71 of the Land Titles Act.
[10] The Agreement states in its recitals that “the trustee holds title to the lands in “Schedule A” attached hereto as trustee for the owner”. The “trustee” is Nancy J. McIntosh Holdings Corporation and the “owner” is described as 2143569 Ontario Ltd. The agreement sets out various terms relating to the relationship between the owner and the city of Niagara Falls. Specifically the agreement deals with conditions to be met if the owner is to undertake any construction on the property or adjacent lands. The agreement does not mention any transfer of beneficial title or use of the term beneficial owner”. Your Host Motor Inn is not mentioned in the agreement. No mention is made regarding how or when the appellant obtained the interest in the property.
[11] On August 9th, 2010, the Ministry informed the applicant of its right to cancel the deferred land transfer tax. The applicant submitted the required documents on September 29th, 2010.
[12] On October 20th, 2010, the respondent refused to allow the cancellation of the deferred tax on the grounds that a conveyance, instrument or electronic document evidencing the disposition had been registered. The Ministry takes the position that the development agreement is a conveyance or that it is an instrument evidencing the disposition of the beneficial interest in the land within the meaning of S. 9(c) and S. 11(a) of the Act causing land transfer tax to become payable.
[13] The term “evidencing the disposition” in S.3(11)(a) in this situation means the disposition by Your Host of its beneficial interest in the land to the appellant rather than receipt of the interest in the land by the appellant.
[14] Both S.3(9)(c) and (11)(a) use the wording “evidencing the disposition”.
[15] “Disposition” means “the act of transferring something to another’s care or possession; the relinquishing of property”.
Blacks Law Dictionary, 7th edition, West Group 1999…
“The action of distributing or transferring property or money to somebody.”
The Concise Oxford English Dictionary, 10th edition, Oxford University Press.
[16] The use of the words “the disposition” rather that “a disposition” in the circumstances of this case leads to reference to a specific disposition, namely the disposition from Your Host to the appellant, not just any disposition to the appellant.
932292 Ontario Inc. v. Ontario (Minister of Finance) [1997] O.J.2276.
[17] Merely mentioning the appellant as “owner” may evidence that the appellant acquired the property (that is that there has been an acquisition), but does not refer to a specific disposition, in this case by Your Host to the appellant.
[18] Evidence of the specific disposition by Your Host to the appellant must be registered on title in order for there to be a violation of the requirements in S.3(9)(c) and 3(11)(a). Merely registering the recital that the appellant has become “owner”, that is, has acquired the beneficial interest in the property does not do so. Evidence of “the” disposition would at the very least have to identify the entity disposing of the property (Your Host) and the entity benefitting from the disposition (2143569 Ontario Ltd.). The recital in the development agreement with the city of Niagara Falls does not accomplish this.
[19] The appeal is allowed. Order to go directed to the Minister of Revenue to vacate the statement of disallowance and return the funds claimed as due and payable from the appellant.
[20] The appellant is entitled to costs of this appeal. If the parties cannot agree on the quantum of costs, they may make submissions in writing with the appellant’s claim for costs to be received within 10 days of release of these reasons, the respondent’s submission within 10 days of receipt of the appellant’s submission, or 20 days from release of these reasons whichever comes first, and the appellant’s reply, if any, five days after that.
Lofchik, J.
Released: 12th August, 2014
COURT FILE NO.: 4646/12 (Welland)
DATE: 2014-08-12
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
2143569 Ontario Inc.
Applicant
- and –
The Minister of Revenue
Respondent
REASONS FOR JUDGMENT
LOFCHIK, J. (vt)
Released: 12th August, 2014